Equipment Financing

Purchase equipment with a flexible business line of credit.

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*This business loan calculator assumes a monthly interest rate of 3.3%. Your interest rate may vary based on your application information.

Why Consider Equipment Financing

Equipment financing is a type of small business loan that allows businesses to borrow money to purchase the gear they need while using the equipment itself as collateral to secure the loan.

It’s similar to how a car buyer can use the vehicle’s title as a guarantee that a car loan will be paid.

For businesses, equipment financing can be used to purchase any number of goods, such as IT equipment, commercial-use vehicles, machinery or even furniture.

The amount and terms of such an equipment loan depend largely on the value of the purchase and its expected lifespan. Payments are usually made monthly and a down payment is required, with 20 percent being a standard amount.

A business will typically need good business credit, a business plan and financial record indicating income and expenses. Lenders may also ask to see the resume of a small business owner.

Equipment financing offers many advantages to a small business owner: such loans are usually quicker and easier to obtain than a standard term loan, the interest paid may be tax deductible as an operating expense and it allows the business to maintain cash on hand rather than deplete it all at once with a major purchase.

Another advantage offered by some lenders is partial reimbursement of any added expenses related to the purchase, such as delivery charges.

Lease Equipment vs. Borrow Equipment

While equipment financing has its advantages, an alternative to this is leasing the equipment instead of buying it outright.

One advantage to leasing is that it may not require a down payment, or will have a smaller down payment than that required for a commercial loan — although there could be added costs with an equipment lease, such as taxes or delivery charges.

Leasing also provides the option of simply returning the equipment when the lease expires, which can be useful in cases where a business isn’t sure what its equipment needs will be and doesn’t want to make a long-term commitment.

Some lease agreements come with the option to purchase the equipment for a small amount at the end of the lease period. Of course, if something is purchased with an equipment loan a business will own the item outright as long as the loan is paid off.

Purchase Equipment with a Line of Credit

Headway Capital offers a flexible business lines of credit for any legitimate business needs — including buying equipment.

Once approved, you can borrow as much as you need (up to your credit limit), as many times as you need to, without having to reapply. The repayment schedule is set by you when you draw on these funds, and you’ll only pay interest on what you borrow each time.

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